Around the Web: A Week in Summary
The following information has been sourced by Business Brokerage Press for the benefit of the business brokerage community. The views of these articles do not necessarily represent the views of Business Brokerage Press. We hope you find this information helpful.
A recent article from Axial entitled “Consumer M&A: Acquiring the Competition” discusses several types of acquisitions and the value that each can deliver. As seen in the 2008-2009 economic downturn, times of crisis can lead to opportunity in the M&A space.
Types of acquisitions explored include:
- Acquiring the Competition – This deal type involves acquiring potential challengers to your business.
- Established Brands – This deal type involves acquiring larger, more established brands in your industry.
- Horizontal Expansion – This deal type involves expanding into adjacent businesses.
Click here to read the full article.
A recent article from Bloomberg Tax entitled “INSIGHT: Impact of Covid-19 on Middle-Market Private Equity M&A” discusses the ramifications of the COVID-19 shutdown on middle-market private equity mergers and acquisitions.
The shutdown has presented challenges including:
- Many sellers have put their sale plans on hold or at least have slowed things down
- Buyers are struggling to complete due diligence as in-person activities have been limited
- Access to debt markets is tighter
- Risk allocation and valuation have become key issues
Despite these challenges, buyers are seeing favorable deal terms and valuation gaps are being bridged through a variety of deal features. And with challenges comes opportunity.
Click here to read the full article.
A recent blog post from Exit Strategies Group entitled “M&A Advisor Tip: COVID-19 Era Due Diligence Part 1” explores potential questions that may come up during due diligence regarding staffing in relation to COVID-19.
The workplace as we know it has changed and business operations have had to adapt to survive COVID-19 challenges. This will likely come up during the due diligence phase of selling a business. Questions may arise regarding layoffs, key employee retention, compliance, health and wellness considerations, safety plans, and remote working.
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Around the Web: A Week in Summary
The following information has been sourced by Business Brokerage Press for the benefit of the business brokerage community. The views of these articles do not necessarily represent the views of Business Brokerage Press. We hope you find this information helpful.
A recent article from BizBuySell entitled “Small Business Acquisitions Dive in April Before Rebounding to Close the Second Quarter” reveals the results of BizBuySell’s 2020 2nd Quarter Insight Report. The report aggregates statistics from business-for-sale transactions from business brokers across the U.S. The 2nd quarter experienced serious shifts due to the COVID-19 shutdown.
Key findings from the report include:
- Small business transactions dropped 39% in Q2, with the biggest drop in April and some rebounding at the end of the quarter
- During May and June, the number of buyers searching and inquiring about businesses on BizBuySell eclipsed pre-pandemic levels
- 66% of buyers are seeking a profitable, pandemic resilient businesses
- The median sale price of businesses sold in Q2 rose 6.1% compared to 2019
- 68% of owners experiencing a decline expect it to rebound within the next year
- 16% of business owners plan to exit their business earlier as a result of the pandemic, 20% plan to exit later, 61% are not changing their timeline
Click here to read the full article.
A recent blog post from Transworld Business Advisors entitled “How to Prepare Your Business for a Post-COVID-19 Sale” discusses important things to keep in mind in light of COVID-19 if you plan to sell your business during the second half of 2020.
Consider the following:
- Do what you can to keep revenue coming in such as selling online or offering delivery
- Keep detailed financials on a month-to-month or week-to-week basis
- Write down what you learned, what you changed, and how the business has survived
- Evaluate how your industry has changed so you can offer insights to buyers
- Improvements made to help your business survive will also likely help it sell
Click here to read the full article.
A recent article from BizBuySell entitled “Study: The Impact of the COVID-19 Pandemic on Small Businesses” discusses BizBuySell’s recent survey of over 3,000 small business owners and buyers regarding the impact of COVID-19. The 41 question survey covered topics such as government mandated shutdowns, rehiring challenges related to unemployment benefits, exit strategies, expansion plans and acquisition goals.
Key findings from the survey include:
- 51% of businesses have had to close or suspend some operations
- 52% of businesses who are starting to rehire furloughed or laid off workers have experienced challenges due to the $600 federal unemployment benefit
- 16% of business owners plan to exit earlier than planned and 20% plan to exit later
- 80% of business owners would consider buying a business that has remained open but has been negatively impacted by the pandemic
- Buyers are looking to utilize the CARES Act benefit of 6 months free principal and interest on new SBA loans closed by September 27th
Click here to read the full article.
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Around the Web: A Week in Summary
The following information has been sourced by Business Brokerage Press for the benefit of the business brokerage community. The views of these articles do not necessarily represent the views of Business Brokerage Press. We hope you find this information helpful.
A recent blog post from Exit Strategies Group entitled “Methods of Selling Distressed Business Assets” discusses options for businesses who become financially distressed as a result of the pandemic shutdown. There is currently an active market for distressed business assets, giving these owners some options to exit.
Four common ways to sell assets from a distressed business include:
- Asset sale in which lenders or creditors may be asked to forgive or discount outstanding debts
- Secured party short sale under Article 9 of the Uniform Commercial Code
- Asset sale in an Assignment for the Benefit of Creditors
- Section 363 asset sale in a Chapter 11 or Chapter 7 bankruptcy
Click here to read the full article.
A recent article from NuWireInvestor entitled “Buying a Business? Be Sure to Avoid These Mistakes” examines costly mistakes to avoid when buying a business. The current economic environment has created real opportunities for buyers, however it is still important to buy wisely in order to have a positive impact on your life.
Key mistakes for buyers to avoid include:
- Failing to ask important questions such as “Why is the business for sale?” and “What do I need to operate this business?”
- Failing to carefully inspect several years of tax records
- Not being honest with yourself and picking a business that doesn’t fit who you are
- Letting everyone go right away and replacing them with your own people
Click here to read the full article.
A recent article from Divestopedia entitled “Selling Your Business: What Sale Process Is Best?” discusses three ways to sell a business and the pros and cons of each. When it’s time to sell, it’s important to know your options and to carefully consider which option is right for your business and for your goals.
Three common ways to sell a middle market business include:
- Broad auction – This opens things up to the full spectrum of buyers, which can maximize value yet can also take longer and comes with a higher risk of a confidentiality breach.
- Controlled auction – This involves approaching a limited number of buyers who would be a good fit, which can help maintain confidentiality and drive a higher value yet it can take some time to complete.
- Negotiated sale – This involves a very limited number of buyers (often just one buyer), which can be quicker and confidential yet could lead to a lower sale price.
Click here to read the full article.
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Around the Web: A Week in Summary
The following information has been sourced by Business Brokerage Press for the benefit of the business brokerage community. The views of these articles do not necessarily represent the views of Business Brokerage Press. We hope you find this information helpful.
A recent blog post from Sunbelt entitled “6 Reasons You Should Consider Buying a Home-Based Business” discusses a recent rise in home-based businesses and the pros of buying a home-based business.
Common benefits of buying a home-based business include:
- Reduced overhead
- Greater flexibility
- Increased creativity
- Happier and more productive employees
- Ability to attract qualified talent from other geographic areas
- Tax advantages
Click here to read the full article.
A recent blog post from Viking Mergers & Acquisitions entitled “The Silver Tsunami Is Coming” explores what the next 10 to 15 years may look like as baby boomer business owners get ready to retire and the next generation takes over.
Baby boomers own a large percentage of the nation’s privately held companies. Not only are these owners approaching retirement, but they are also witnessing a lot of change related to COVID-19. Many of them have the bulk of their assets positioned in their business, making it critical to properly prepare for selling and retiring.
Preparation tips include:
- Assemble your deal team consisting of an accountant, financial planner, attorney and business broker
- Establish consistent accounting practices to maximize shareholder wealth
- Develop an organizational chart, job descriptions and employee handbook
- Define your vision, mission and core values
- Get contracts, leases and transferable agreements in order
Click here to read the full article.
A recent article from Divestopedia entitled “How Targeted Should Your Sale Process Be?” discusses how to determine the right number of buyers to approach when selling your business.
The following questions can help you find the sweet spot for your unique deal:
- Is there a small number of buyers who would reasonably have interest and have the financial wherewithal to pay a fair price for your business?
- Is yours a business where very specialized industry experience and knowledge are required in order to get comfortable with the acquisition?
- Are you confident that, among the shorter list of buyers, there will be several bidders who will make attractive offers?
- Will it be damaging to the business to share confidential information to numerous parties?
The answers to these questions can help you determine whether a narrower pool of buyers or broader pool of buyers is best for your deal.
Click here to read the full article.
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Around the Web: A Week in Summary
The following information has been sourced by Business Brokerage Press for the benefit of the business brokerage community. The views of these articles do not necessarily represent the views of Business Brokerage Press. We hope you find this information helpful.
A recent article from Small Business UK entitled “Are people buying or selling a business during COVID-19?” examines buyer interest in light of the COVID-19 pandemic as observed by BizBuySell.
When the shutdown hit, BizBuySell noticed that although searches for businesses for sale on their website dropped dramatically, there were still thousands and thousands of buyers looking for businesses for sale. Interests shifted to industries such as tech, e-commerce, convenience stores, pet stores and gas stations. It seemed buyers had cash and were looking to make a smart move.
BizBuySell decided to talk to buyers and get an idea of their situations and plans. Survey findings include:
- Over 54% had significant cash to use as a deposit
- 80% believed prices would come down
- 38% intended to finance the entire purchase with cash
Click here to read the full article.
A recent article from Forbes entitled “10 Ways To Safeguard Your Interests When Selling Your Business” offers strategies to help business owners protect their interests when selling their business.
These strategies include:
- Vet all parties involved
- Enlist the help of experts
- Only sell the buyer what they are actually looking for
- Get a valuation
- Understand the value of the business
- Make sure the buyer can pay you
- Limit indemnification claims
- Get an upfront payment
- Evaluate tax implications
- Register intellectual property and make specific arrangements for each item
Click here to read the full article.
A recent article from Divestopedia entitled “The Value of a Valuation” explores the importance of investing resources into a business valuation and understanding what factors impact the value of a business.
Factors that impact the value of a business include:
- Supply & Demand – High demand and low supply typically result in a higher sale price.
- Growth – High growth potential that is detailed and credible can lead to a higher sale price.
- Risk – If a buyer perceives a higher risk, they may be inclined to pay less for the business.
- Volatility – How vulnerable a business is to external factors can impact what a buyer is willing to pay for it.
- Synergies – If a buyer sees synergies between their business and the business for sale, or if they want to block someone else from buying the business and becoming a threat to their business, they may be apt to pay more.
Click here to read the full article.
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